Reuters: South China firms see investment dip, wages rise

China Labour Bulletin is quoted in the following article. Copyright remains with the original publisher.

HONG KONG, March 11 (Reuters) - Foreign investment in south China is expected to fall 4.9 percent this year, with firms facing the challenge of labour shortages and rising wages, according to a survey by the region's American business chamber.

Total investment in the area which encompasses Guangdong and China's export powerhouse of the Pearl River Delta were expected to reach $9.4 billion this year, compared with $9.88 billion in 2009 when the financial crisis hit many of the region's manufacturers which generate around a third of China's exports.

Despite this, around 50 percent of the 405 companies surveyed by the American Chamber of Commerce in South China said the overall business environment had "improved somewhat" since last year when the region saw mass closures of mostly smaller factories and mass lay-offs of migrant workers.

In a sign of continuing difficulties, however, nine percent of firms said the current situation had got "worse".

While Amcham does not disclose the names of firms in the survey, a third are multinationals with worldwide revenues of more than $500 million each, and likely include Procter & Gamble and Wal-Mart, the world's largest retailer.

Harley Seyedin, the business group's president, said labour shortages were now a "big challenge", with firms having no choice but to raise wages of unskilled factory workers by around 40-50 percent in recent months.

While the survey between December and February did not directly address the labour issue, Seyedin said many foreign exporters expected such wage inflation to eventually trickle through to higher priced China-made goods in Western markets.

"The biggest implications will be the cost of goods and services back home, certainly there'll be a rise in that," said Seyedin. "They'll have to fold the wage costs into the (prices)."

A recent survey by Standard Chartered Bank, however, found that wages were up only around 10 percent in nominal terms in Guangdong province, a rise in line with wage trends from 2003-07.

"We do not see this as inflationary wage growth. Rather, it roughly matches the pace of overall economic growth," wrote Stephen Green, a Standard Chartered economist in a research note.

China Labour Bulletin, a labour rights group, also wrote that fears of a "labour famine" of millions of workers in Chinese coastal export regions may be overblown, with many migrant workers continuing to face low base wages, long hours and little job security.

The Amcham survey also found that 80.5 percent of firms hired new employees over the past year, or 429,000 new staff, before the labour shortages really began to bite.

Regulatory issues were again cited as the top five challenges hindering or limiting a firm's growth opportunities in South China.

Local competition and rising labour costs were listed as the second and third. Most firms, however, shrugged off the potential risk of yuan appreciation eroding the pricing competitiveness of their cheap Chinese goods.

"We can surmise that the issue that least concerns participants is appreciation of the renminbi (yuan)," the report said.

Consumer inflation in the whole of China spurted to a 16-month high in February and a raft of economic data on Thursday displayed broad-based strength, providing fresh arguments for policy tightening sooner rather than later.

The pace of credit growth halved in February, as expected, but some economists said the central bank would probably not wait long before increasing banks' required reserves for a third time this year and perhaps even raising interest rates or resuming gradual appreciation in the yuan. (Reporting by James Pomfret; Editing by Nick Macfie)

Back to Top

This website uses cookies that collect information about your computer. Please see CLB's privacy policy to understand exactly what data is collected from our website visitors and newsletter subscribers, how it is used and how to contact us if you have any concerns over the use of your data.